Sluggish growth and tumbling profits at Stagecoach underline the challenge facing rail and bus operators in the UK, as highlighted by First Group earlier this month.
Stagecoach has, for the last 18 or so months, repeatedly reminded investors that it is operating in a challenging environment. Now, the impact of economic uncertainty, and more worryingly, of recent terrorist attacks, have been highlighted by the Perth-based group as it reported below two per cent revenue growth.
Even so, the stand out number in the Stagecoach accounts is the £84.1 million exceptional charge booked against future losses on the Virgin Trains East Coast operation. The news put a six per cent dent in the closing share price.
Stagecoach now has the job of attempting to revise commercial terms with the government to ensure the operation returns to profitability after 2019.
The group said it is concerned that the government expects operators to bear significant financial risks for events outside of their control – such as changes to the prioritisation of infrastructure spend.
The discussion over the East Coast route will be keenly observed by all operators, and could well have a wider impact on the entire franchise system.
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